The blog of the Urban Institute
October 21, 2020

Local Newspapers and Other Small Businesses Are Still Struggling. What Can Policymakers Do?

October 21, 2020

Because of the COVID-19 pandemic and the ensuing economic crisis, small businesses nationwide have been in dire need of economic relief. The Paycheck Protection Program (PPP) provided some assistance for these businesses, and the industries with the highest program participation based on dollars received accounted for almost 75 percent of job growth back in May.

But not all industries in need were helped by the program. Minority-owned small businesses faced severe disadvantages: analysts suggest 95 percent of Black-owned businesses were excluded from the program, and Black and Latino businesses are more likely to lack the necessary banking relationships needed to access program funds. Restricting funding to payroll costs also ignored other costs businesses have, drawing into question whether the program prioritizes preserving businesses or just maintaining paychecks.

Many businesses overlooked or excluded from PPP funds still need assistance to weather their pandemic-related shortfalls. Local newspapers, for instance, were largely excluded, illustrating the program’s flaws and pointing to other businesses that might need additional assistance.

How the COVID-19 pandemic has hurt local newsrooms

Before COVID-19 spread to the US, local newsrooms were facing an industry-wide crisis. Nearly 1,800 local newspapers have ceased publication since 2004, including papers in large cities, such as New Orleans. Newspaper-specific newsroom employment, which includes editors, reporters, photographers, and videographers, has more than halved since 2008, driving an industry-wide employment drop.

The pandemic has accelerated the shrinkage of ad revenue that local newspapers often rely on, with more than 50 local newsrooms closing and others turning to layoffs, furloughs, and cost-saving measures like ending print editions. Without local newspapers, communities have higher poverty rates and lower rates of educational attainment.

Communities that lose local newsrooms see increases in political polarization of voters and diminished information on the decisions of localized governmental bodies, which can lead to an increase in long-term borrowing costs. More than 65 million Americans currently live in counties with only one local newspaper or none at all.

Why local newspapers have been underserved by the Paycheck Protection Program

For many local newspapers around the country, the Paycheck Protection Program’s “affiliation” stipulation of ownership has been a major impediment. For an organization to be eligible for loans, it must have fewer than 1,000 employees, accounting for the entire majority ownership organization, not just the newspaper itself.

Many local newspapers have been absorbed into chains owned by large companies over the past decade and are not eligible for PPP loans, even though they employ local journalists and rely on local businesses, making them more akin to local small businesses than national conglomerates. Close to 80 percent of the entire US newspaper circulation were disqualified from the loan program because of this criterion.

Even when newspapers did qualify for PPP funds, they were required to use 75 percent of the money to rehire workers, neglecting cost areas needed to maintain businesses: rent and utilities. Using PPP funds for rent and utility expenses would make businesses ineligible for loan forgiveness. Another program, the Economic Injury Disaster Loan (EIDL) program, has no restrictions on funds usage, but that program only received $77 billion, compared with $660 billion for the Paycheck Protection Program. The EIDL program also contains conditions that small-business owners may have little prior experience navigating.

What can policymakers do to expand assistance for local newspapers?

The current situation looks dire for the nation’s newspaper industry, but there is still hope for targeted policy solutions. In April, a group of senators (PDF) signed a letter stating the importance of local newspapers in conveying necessary public health information during the pandemic and called for economic stimulus specifically targeted for local newspapers. US House Representative Ann Kirkpatrick of Arizona also introduced the Local Journalism Sustainability Act in mid-July, proposing three methods of financial relief through tax credits for local publications and for businesses that advertise through local media. Although analysis and modeling needs to be done to demonstrate the proposals’ effectiveness, they may provide a useful base for local governments to brainstorm potential solutions.

Policymakers can also work within existing federal spending priorities by transforming the federal advertising budget (PDF) into an effective stimulus for local news outlets. Increasing the advertising appropriations available and instituting new requirements on those funds to be spent through local media outlets and outlets that have historically served and represented communities of color could be a valuable lifeline. Partnerships between localized civic information projects and the Corporation for Public Broadcasting can also more accurately target stimulus funds to areas without localized news coverage. This relief method has a strong historical basis, as the US government has previously provided direct and indirect financial support (PDF) to news publishers.

Local governments are uniquely positioned to extend similar solutions to other struggling small businesses, as they have the greatest understanding of these businesses’ challenges. Some fear direct local government involvement will lead to government influence and censorship at news outlets, but municipal governments successfully navigated that concern (PDF) throughout history, sometimes through the establishment of municipally financed and community-owned newspapers.

Some county governments have structured loan and grant programs to target locally owned small businesses. Other regions have already established programs, such as Chicago’s Neighborhood Opportunity Fund, that can be used to target funding to businesses in communities neglected in the initial funding distribution.

Local newspapers have long been a valuable asset in American society and are especially important to help communities navigate public health crises, so preserving these institutions is essential to the fabric of their home communities.

To ensure the long-term viability of local newspapers and other small businesses underserved by the PPP loans, policymakers should consider more stimulus relief and flexibility in usage of funds, with communication key to determine how best to meet community business needs.

 

A sign for the local newspaper, The Selma Times-Journal, sits outside the newsroom in the downtown area on February 14, 2015 in Selma, Alabama. (Photo by Ann Hermes/The Christian Science Monitor via Getty Images)

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